BMW, Nissan woo dealers to beat rivals

SOUTHFIELD/LOS ANGELES: Bayerische Motoren Werke AG and Nissan Motor have turned to unconventional buyers of their vehicles at times this year: their dealers.

BMW, locked in a US luxury sales race with Daimler AG's Mercedes-Benz, began offering dealers allowances of as much as $7,000 a car on July 31 to boost sales to their demo fleets that are used for test drives.

Nissan, pushing to pass Honda Motor in US market share, sells vehicles to dealers for use as rentals, as it did in March at the fiscal year-end.

The actions by at least two of the world's largest automakers resemble the ways General Motors Co. and Ford Motor Co. used such practices to lead luxury and car segments in the 1990s. Dealers said BMW and Nissan's moves also reflect rivalries within carmakers' operations, as US sales units vie for vehicles with retailers in China and other markets.

"This all comes from tremendous competition," said Geoffrey Pohanka, president of Pohanka Automotive Group, which owns Nissan and Mercedes dealerships in Maryland and Virginia. "It's ultimately artificial. The key is to get the car into the customer's driveway, not to get it from one side of my lot to the other."

BMW introduced "Specialty Demo Allowance" deals late last month by offering total payments ranging from $2,500 for some 2012 5-Series models to $7,000 for the 2012 7-Series, according to a July 31 notice sent to dealers. The allowances, which also were available for the 2012 3-Series, were kept in place this month, according to an Aug. 14 e-mail to dealers. The incentives helped BMW narrow Mercedes's lead in US sales to just 104 vehicle deliveries through July, according to statements from the automakers. Munich-based BMW beat Mercedes last year by 2,715 deliveries, snapping an 11-year reign by Toyota Motor Corp.'s Lexus brand.

"Reporting vehicles being transferred from new vehicle inventory to 'demo inventory' as 'sales' may look funny from the outside, but in the context of global competition for product and inventory balancing, it is a widespread practice," said Greg Goodwin, chief executive officer of Kuni Automotive, which counts a BMW franchise among its 14 dealerships in Washington, California, Colorado and Oregon.

Nissan asked its dealers to boost vehicle purchases from the manufacturer to use in service fleets in March, according to representatives of 25 Nissan franchises. Most of the dealers asked not to be identified to avoid losing future allocation of vehicles from Yokohama, Japan-based Nissan.

Dealers' purchases helped Nissan increase US sales by 13% to 136,317 in March, the last month of the company's fiscal year. Nissan reported that profit in its fiscal fourth quarter more than doubled to 75.3 billion yen, beating the 65 billion yen average estimate of seven analysts surveyed by Bloomberg.

That selling pace was short-lived. Nissan deliveries plunged the next month by 48% to 71,329, according to researcher Autodata Corp. in Woodcliff Lake, New Jersey. "If you report more cars than were sold, you're going to report less cars than were sold in some future period," Pohanka said in a telephone interview.

Past Practices

To fend off Honda's Accord for the title of the industry's best-selling car in 1994, Ford sold "an aircraft-carrier load" of Taurus cars to daily rental fleets or at cheap lease rates in December, Pipas said. The Dearborn, Michigan-based automaker reported 42,198 Taurus sales in December, 31 percent more than the average monthly deliveries for the model in the year's first 11 months.

In 1998, Ford's Lincoln brand had a shot at outselling Cadillac for the first time since World War II. Hopes were dashed when GM said its luxury brand's December sales rose 38%, boosting full-year deliveries to 187,343 and beating Lincoln by 222 vehicles. Months later, the truth came out: In May 1999, GM said it overstated its Cadillac division's sales for the previous December by 4,773 vehicles and dropped its claim that the brand outsold Lincoln.